Winning streak takes rupee to 7-week high

Currency stands below 283/$ in 7th straight day of gains

KARACHI:

Pakistani currency bounced back to a seven-week high at slightly below Rs283 against the US dollar in the inter-bank market on Wednesday, maintaining its winning streak for the seventh consecutive working day on the back of uptick in foreign currency supply in the banking system.

According to State Bank of Pakistan’s (SBP) data, the rupee appreciated 0.04%, or Rs0.11, and closed at Rs282.90 against the greenback. The currency has cumulatively risen 0.97%, or Rs2.74, in the past four weeks.

Exchange Companies Association of Pakistan (ECAP), however, reported that the local currency edged down 0.08%, or Rs0.25, on a day-on-day basis at Rs284.50/$ in the open market, widening the difference in the currency value between the two markets to 0.56% (or Rs1.60).

The gap was well within the International Monetary Fund’s (IMF) recommended maximum spread of 1.25% (around Rs4 at the current rupee-dollar exchange rate).

ECAP General Secretary Zafar Paracha called the rupee’s drop in open market dealings a temporary phenomenon. “The open market has faced short supply of foreign currencies owing to demand emerging from people going to perform Umrah, which pulled the rupee down (as per daily average pricing formula).”

Paracha said the open market had shrunk after its major business of dollar supply to banks for credit card settlements was shifted to the inter-bank market. Therefore, any uptick or downtick in demand for foreign currencies impacts the rupee.

Barring any unexpected development, the local currency is showing signs of recovering to Rs280/$ by the end of December. “Historical trend, however, suggests that currency markets record an uptick in demand for foreign currencies at year-end.”

Published in The Express Tribune, December 21^st, 2023.

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